I am using Visual Studio 2012 trial. I created a Sample Application and added AjaxControlToolkit reference using NuGet to latest build of toolkit. I am already using Toolscriptmanager on my webpage under form Tag.

Error: AjaxControlToolkit requires ASP.NET Ajax 4.0 scripts. Ensure the correct version of the scripts are referenced. If you are using an ASP.NET ScriptManager, switch to the ToolkitScriptManager in AjaxControlToolkit.dll

Please help me to sort out this issue.

As per suggestion I have changed webconfig and project properties to .NET 4.0.

I tried to change all projects to 4.0. It worked once, but now I am getting the same error again. Now web config looks

Actually If you convert your project from .net 4.5 to 4.0. it still refers some library of 4.5. Thats why it don't work.
You either need to recreated project in 4.0 framework or Delete existing library and refer them from 4.0 framework.